Business Financial Statement Analysis Guide
Statements, techniques, ratios, and considerations.
Financial Statements
Balance sheet
Focus: Assets, liabilities, equity
Purpose: Financial position
Income statement
Focus: Revenue, expenses, profit
Purpose: Profitability
Cash flow statement
Focus: Cash movements
Purpose: Liquidity
Equity statement
Focus: Owner changes
Purpose: Ownership tracking
Analysis Techniques
1. Horizontal analysis
2. Vertical analysis
3. Ratio analysis
4. Common-size analysis
5. Trend analysis
6. Comparative analysis
7. Segment analysis
8. DuPont analysis
9. Quality of earnings
10. Red flag detection
Key Ratio Categories
Profitability ratios
Examples: Margin, ROI, ROE
Insight: Earning ability
Liquidity ratios
Examples: Current, quick ratios
Insight: Short-term health
Efficiency ratios
Examples: Turnover ratios
Insight: Asset utilization
Solvency ratios
Examples: Debt ratios
Insight: Long-term stability
Analysis Considerations
1. Accounting policies
2. Revenue recognition
3. Expense timing
4. Asset valuation
5. Disclosure completeness
6. Management integrity
7. Industry context
8. Economic conditions
Financial Statement Analysis Checklist
1. Review all financial statements. 2. Apply horizontal analysis. 3. Apply vertical analysis. 4. Calculate key ratios. 5. Compare to benchmarks. 6. Identify trends. 7. Assess accounting policies. 8. Evaluate disclosure quality. 9. Consider industry context. 10. Form analytical conclusions. Financial statement analysis = business transparency. Statements reviewed. Horizontal applied. Vertical applied. Ratios calculated. Benchmarks compared. Trends identified. Policies assessed. Disclosure evaluated. Context considered. Conclusions formed.